Richie Capital Group, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of 2.6% was recorded by the RCG Long Only strategy for the second half of 2021, while the RCG Long Short Fund lost 2.5% for the same period. The fund’s closest benchmarks, the Russell 3000 Index and the Equity Long Short Index gained 8.2% and 2.6% for the quarter respectively. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Richie Capital Group, the fund mentioned Viemed Healthcare, Inc. (NASDAQ: VMD), and discussed its stance on the firm. Viemed Healthcare, Inc. is a Lafayette, Louisiana-based equipment and home therapy provider, that currently has a $258.7 million market capitalization. VMD delivered a -15.59% return since the beginning of the year, while its 12-month revenues are down by -37.08%. The stock closed at $6.50 per share on July 19, 2021.
Here is what Richie Capital Group has to say about Viemed Healthcare, Inc. in its Q2 2021 investor letter:
“Viemed (VMD – down 29 % in the quarter) – The respiratory healthcare services company has experienced a challenging 2021 after benefiting from the pandemic in 2020. Growth has slowed in their core business primarily from Respiratory Technicians having difficulties accessing healthcare facilities due to Covid restrictions. The company was able to offset these challenges last year by providing much needed ventilators to hospitals. Now that economies are opening up, VMD expects to regain access to hospitals and get back to their 30%+ growth. March was their busiest month for new patients since the onset of the pandemic.
The biggest impact on stock performance in the quarter came from the release of a report from the US Department of Health and Human Services, Office of the Inspector General regarding an audit of VMD’s home patients. The OIG report claimed that VMD’s charging policies did not comply with Medicare requirements and thus VMD’s patients overpaid by some $29M. The company vehemently denies these claims and issued a detailed response. I reached out to the COO to clarify the details.
The OIG findings were not aligned with the Centers for Medicare & Medicaid Services (CMS) policy which they follow and comply with. The CMS had previously conducted a detailed audit for the same period. The CMS audit reported a 98% compliance rate (41 of 42) cases, while the OIG claimed non-compliance on all 42 of the exact same cases. From VMD’s perspective, they are caught in the crossfire between two sister agencies.
VMD has received no negative feedback from their hospital clients. And for all patients, a hospital employee is involved with the sales process for every non-invasive ventilator. The company expects this to pass with limited to no monetary repercussions.”
Based on our calculations, Viemed Healthcare, Inc. (NASDAQ: VMD) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Viemed Healthcare, Inc. was in 10 hedge fund portfolios at the end of the first quarter of 2021, compared to 12 funds in the fourth quarter of 2020. VMD delivered a -27.98% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.